In the context of bankruptcy, liens refer to a creditor's interest in a debtor's property (an encumbrance). Creditors can obtain liens through a voluntary grant by the debtor, judicial action, or statute, depending on the creditor's status.
Chapter 7 and chapter 13 bankruptcy filings are the most common. Although chapter 11 is less common, it should be considered if the debtor is a business that wishes to continue operations. Individuals, corporations, and partnerships are eligible for Chapter 7 cases. Except for railroad companies, banks, and certain corporations, virtually anyone can petition under chapter 7. Chapter 13 bankruptcy is only available to individuals with a consistent income. Chapter 11 is accessible to both individuals and businesses.
A chapter 7 debtor is typically not required to appear in court unless an objection is filed. A chapter 13 debtor is permitted to appear in court during a plan confirmation hearing.
In chapter 7 bankruptcy, the court supervises the sale of the debtor's assets to repay creditors. To qualify for a Chapter 7 bankruptcy, the debtor's income must be below the state minimum. A trustee is appointed to manage your """"estate,"""" which includes all of your existing assets and prepetition debt. Prepetition debt is debt that exists at the moment the bankruptcy petition is filed. Certain sections of the Bankruptcy Code prohibit the sale of certain types of property. Individuals may retain exempt property, while the proceeds from the sale of nonexempt property are distributed to creditors. This chapter of bankruptcy results in a discharge and a fresh start for the debtor. A successful discharge eliminates all unsecured debt owed by the debtor. Credit card debt, personal loans, and utility and medical bills are examples of unsecured debt. Educational loans are excluded unless the borrower can demonstrate undue hardship. In the majority of cases, the debtor has no assets. Because of the ability to dissolve, corporations and partnerships are not afforded a new beginning like individuals. Consequently, it is crucial for individuals to obtain legal counsel.
In a chapter 13 bankruptcy, the debtor must be an individual with a regular income who wishes to retain nonexempt property. To qualify for chapter 13, a debtor must have limited unsecured debt, secured debt that does not exceed $1,784,000, and a regular source of income, such as a pension, trust fund, wages, or family support. Chapter 13 is only available to individuals with sufficient income to repay creditors over a period of three or five years.
Here, the Code allows individuals to establish a three- or five-year payment plan with creditors under court supervision. The payment plan incorporates only prepetition debt, or debt that existed prior to the bankruptcy filing. The length of the payment plan is determined by the monthly income of the debtor. The debtor is able to retain ownership of his or her assets and pay off creditors with future earnings. To do so, identification of the estate's property is required, and the court cannot confirm the plan until it knows the extent of the estate's property. Creditors must authorize the payment plan, and the court must also give its approval. If the payment schedule cannot be confirmed, the case will be liquidated under chapter 7. In addition, the plan cannot pay less than what creditors would have received under chapter 7 in order to be confirmed.
The debtor in a chapter 11 case may be an individual, business, or other entity. By restructuring or reorganizing the debtor's debts, Chapter 11 enables the debtor to continue business operations and retain the assets necessary to continue operations. The payment plan includes only preconfirmation debt, which is debt that existed at the time the bankruptcy petition was filed. To be successful, the debtor must be able to submit a reorganization plan, obtain creditor acceptance, and obtain court approval. In the absence of a reorganization plan within 18 months or one and a half years, the debtor will enter chapter 7 liquidation. Debtor retains the essential assets to continue operations and does not surrender any property. In order for the plan to be confirmed, it cannot pay creditors less than what they would have received under chapter.
Always obtain legal counsel prior to filing for bankruptcy.""
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